Do Hybrid Funds Provide a Valuable Mix?

Investing in a hybrid fund can be a good alternative to putting your money into an equity fund. Many investors like the hybrid fund because of the nice mix of investments that you get. Here are the basics of the hybrid fund and whether it is actually a valuable form of investment.

What Is a Hybrid Fund?

A hybrid fund is one that invests in a number of different types of investments. Many mutual funds invest solely in stocks and are referred to as equity funds. By comparison, the hybrid fund will invest in stocks, bonds and even money market investments. This provides an even more diversified portfolio for investors than you can get with a typical equity fund.

What They Provide

Investing in a hybrid fund can actually provide you a few different benefits. By putting your money into this type of fund, you will get to realize capital appreciation and create an income stream. Therefore, this is a nice mix of investments that gives you the best of both worlds. Many mutual funds will focus on one or the other.


In addition to the two different ways to make money, this type of fund also provides fantastic diversification. When the stock market goes down, you still have the bond component and possibly the money market component of the fund. Each part of the fund holds a certain weight of the total assets. Therefore, this can significantly lower the market risk overall. On the downside, this can also limit the amount of money that you can make when the market goes up significantly. This means that the hybrid fund will provide you with a very level and steady growth curve.

Balanced Fund

One type of hybrid fund is the balanced fund. With this type of fund, they will usually stick to a set proportion of stocks and bonds. For example, the fund might always hold 60 percent stocks and 40 percent bonds regardless of what the market says.

Asset Allocation Funds

Another variation of the hybrid fund is an asset allocation fund. With this type of hybrid fund, the fund manager has the right to change the mix of stocks and bonds at their discretion. Therefore, if they determine that the stock market is about to go down significantly, they can put more money into bonds and sell off the stock.

Life-Cycle Funds

The life-cycle fund is another type of hybrid fund that has become very popular with retirement accounts. With this type of fund, the allocation of money will change as investors get closer to retirement. It will go from a more aggressive approach to a more passive approach.

Benefit to Investors

Regardless of which type of hybrid fund you choose, it can provide you a good investment vehicle for the future. This is a great way to balance your portfolio and bring in a regular return. If you have plenty of time to invest, using a hybrid fund could be in your best interest.

blog comments powered by Disqus